How Microsoft can reinvent itself in the post-Gates era

A computer on every desk and in every home, running Microsoft software. That, Bill Gates has often said, is the vision on which he and Paul Allen founded their software company in 1975. There’s debate over when the mantra was first articulated—the earliest known instances go back only to the mid-1980s—but this much is undeniable: Microsoft made that audacious goal a reality.

Today, as Gates prepares to step down from day-to-day management of the company, another fact is clear: The modern Microsoft remains a company in search of a second act. True, it remains one of the world’s most profitable enterprises, raking in more dough in its 2007 fiscal year than Apple, Google, Yahoo, Oracle, and Adobe combined. But the cracks in the Microsoft hegemony aren’t just showing, they’re growing.

On the Web, it’s Google, not Microsoft, that inspires the blend of awe and fear that Gates and company commanded in the 1990s—and Microsoft’s answer, the attempted acquisition of Yahoo, fizzled. The company’s attempts to extend Windows and Office to the Web have been lackluster and confusing. Old adversaries like Apple and gutsy upstarts like Mozilla are making meaningful inroads on Microsoftian monopolies. And outside of Redmond, almost everybody seems to regard Windows Vista as a disappointment.

So here’s some unsolicited advice for Microsoft—15 steps that can help the company thrive in the years ahead. Some of these ideas are clearly part of its game plan already; others, it would likely reject out of hand. And hey, certain points conflict with others in the list. Unlike Steve Ballmer and company, I have the luxury of pondering its future without having to pick a strategy and make it happen.

The big picture

1. Stop trying to be everything to everybody. Microsoft makes software and services for everyone from humongous companies to little kids. It provides applications for PCs, servers, industrial devices, phones, GPS units, and cars. It’s trying to be a major force in online advertising. It manufactures gaming consoles and audio players and mice and keyboards and touch-sensitive tables, and owns part of a cable news channel. No company on the planet could do all these things well, and Microsoft doesn’t even do many of them profitably. Rather than jumping on every imaginable bandwagon, it would be smart to focus on core businesses such as operating systems, productivity applications and services, and programming tools. Possible role model: IBM, which is so disciplined about the opportunities it pursues that it decided to exit the PC business it created.

2. Upgrade continuously, not once every few years. Windows Vista is a tad stale in part because it feels like its features were determined years ago, in an earlier era of computing—which they were. That’s a by-product of Microsoft’s decades-old approach to software development and distribution. Google, by contrast, can push out fresh new features onto the Web almost as quickly as it can think of them. Even if Microsoft’s bread-and-butter products remain desktop applications rather than Web-based services, they need to move to a model of ongoing evolution rather than once-in-awhile revolutions. Couldn’t Microsoft Update evolve from a tedious patching system to a cool way to make Windows, Office, and other applications better on a day-by-day basis?

4. Treat customers like kings, not peons. Microsoft rolls out copy-protection technologies that cause headaches for paying customers, then tells those customers it’s doing so for their own good. It insists on doing away with Windows XP when there are legions of users who still want it. Even its corporate motto—“Your Potential. Our Passion”—is patronizing. The company that utterly dominated the computing world could get away with that attitude; the one which faces real competition on all fronts will have to treat customers and potential customers with more respect.

Windows: What should be

5. Make Windows a seamless desktop-Web experience. Desktop software has its advantages, and so do Web-based services. Future versions of Windows would be most powerful if they were a little bit of both. And maybe they will be: In February 2007, Bill Gates told Newsweek about an appealing, “user-centric” scenario in which Windows syncs all of a user’s files, settings, fonts, and other data across the Web, so they’re available at any computer that’s at hand. (Live Mesh, currently available as a preview, seems to be an early incarnation of this vision.)

6. Reboot Windows. In 2000, Apple replaced the creaky operating system known as OS 9 with OS X, an all-new, thoroughly modern OS. The daring gambit saved the Mac OS. Windows isn’t as archaic as OS 9 was, but it’s hard to imagine it staying viable for another decade without a new foundation. “MinWin,” a stripped-down version of the Windows kernel, might be that fresh start, but scuttlebutt says MinWin is not part of Windows 7, Vista’s successor.

7. Split Windows in two. Long-term, the world needs a fundamentally new version of Windows. But the uproar over Microsoft’s plans to kill off Windows XP shows that there are lots of folks who just want a version of the OS that’s familiar and compatible. The company already sells more than 20 versions of the operating system—so why not make both groups of people happy by offering both a legacy edition and a Windows that’s new from the ground up?

8. Make Windows more boring. MS-DOS was a simple, unglamorous piece of software that focused on being a solid platform for applications from Microsoft and other companies. As Windows has added tools for digital photography, entertainment, and communications, it’s become more complex and less satisfying. I’d love to think that Microsoft might go back to basics with future versions of Windows, but one of the first public demos of Windows 7 involved a new version of Windows Paint. That’s not a great sign. Microsoft should concentrate on making the OS more reliable, secure, and easy to use rather than adding features to a paint program.

Applications: Office and beyond

10. Leapfrog Google Docs. Once upon a time, Microsoft productivity apps such as Word, Excel, and PowerPoint were also-rans compared with blockbusters like WordPerfect, 1-2-3, and Harvard Graphics. Then Microsoft earned much of its dominance of the office market the old-fashioned way: By building better software. Today, it shouldn’t be all that hard to build an online suite that trumps Google Docs—and nobody’s in a better position than Microsoft to try.

11. Bundle Office with an online suite. Microsoft has approached the world of online productivity so cautiously in part because it’s worried about murdering one of its cash cows: The same people who pay hundreds of dollars for a copy of Office think that online suites should be free. Why not give those paying customers a great Web version of Office as part of the deal? It might help show the world that essential Net-based tools are indeed worth real money.

12. Make the Office file formats indispensable on the Web. The file formats for Word, Excel, and PowerPoint are among Microsoft’s most valuable property—even the Office 2007 ones that the company has published as open standards. They’d be an even more powerful asset if they were as widely used on the Web as Adobe’s omnipresent PDF. How about a unified Office file viewer—ideally with some basic editing features—that would be a cinch to find, install, and use? (Office Live Workspace does this, sort of, but it’s too complicated to become pervasive.) This would sure make more sense than XPS, Microsoft’s half-baked response to PDF.

13. Take a studio approach to software. Microsoft Game Studios, the company’s game title arm, is run as a loose federation of developers, some started by Microsoft, some acquired by it, and some independent. Examples include Bungie (Halo), Ensemble (Age of Empires), Rare (Viva Pinata), and Lionhead (Black and White). End result: The average Microsoft-published game is arguably more interesting than the average Microsoft-published productivity application. If the company applied the same system to productivity software, it might unleash an explosion of creativity.

14. Build Internet Explorer on top of Firefox. Okay, I’ve suggested this before. I understand that it remains an idiosyncratic and unlikely proposition. But it still seems like a good idea to me. There may have been a time when IE was a strategic asset for Microsoft, but today it’s more of an albatross. So why not dump it for a leaner, meaner “Internet Explorer” that’s really the supremely customizable Firefox under the skin?

15. Be a leading iPhone developer. “To create a new standard takes something that’s not just a little bit different…It takes something that’s really new and captures people’s imaginations,” said Bill Gates in 1984. He wasn’t talking up a Microsoft product—he was raving about the then-new Apple Macintosh. And despite the fact that the Mac competed head-on with PCs running DOS (and later Windows), Microsoft was smart enough to establish itself as a major Mac developer. (It even introduced Excel on that platform first.) If Steve Ballmer were to embrace the iPhone with the same enthusiasm, Microsoft would make money and learn things that could make Windows Mobile more formidable.

[Harry McCracken is a former editor in chief of PC World. He’s developing his own technology site, technologizer.com.]